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Chinese antitrust enforcer sanctions TV provider

On 7 June 2016, the Administration for Industry and Commerce (AIC) in Inner Mongolia held the Xilin Gol branch of the Inner Mongolia Radio and Television Network Group (Xilin Gol Radio and Television) to have violated the Anti-Monopoly Law (AML).

Xilin Gol Radio and Television was ordered to stop its illegal conduct, had illegal gains in the amount of RMB 91,600 (around USD 13,700) confiscated, and was fined around RMB 100,000 (approximately USD 15,000).

The case dates back to October 2015, when the Inner Mongolia AIC’s local bureau in Xilin Gol found indications during its market inspection activities that Xilin Gol Radio and Television had engaged in anticompetitive tying. The Inner Mongolia AIC formally initiated an antitrust investigation after receiving authorisation from the State Administration for Industry and Commerce (SAIC) in Beijing.

Decision’s finding

In its decision, the Inner Mongolia AIC defined the relevant market as that for cable television (TV) and Internet protocol television (IPTV) services delivered in Xilinhot in Xilin Gol. IPTV operates in a closed system – a dedicated, managed network provided by an operator – whereas over-the-top television (OTT TV) streams the audio/video content using regular, open and unmanaged Internet. OTT TV and mobile TV (which allows users access to TV content via the mobile network) were not found to be part of the relevant market as they were not considered effective substitutes for cable TV and IPTV services. In particular, the AIC found that OTT TV providers were not allowed to stream live TV to users as a result of regulatory restrictions, and that mobile TV was generally more expensive and of a lower quality than cable TV and IPTV services.

The Inner Mongolia AIC considered Xilin Gol Radio and Television to be one of only two main service providers and to have a dominant position in the relevant market (with a market share of 98.6%). Its only competitor (which only entered the market in early 2015) had a market share of merely 1.4%. Xilin Gol Radio and Television was found to have a significant degree of control over the market and market entry was difficult, as potential entrants had to obtain relevant licenses and approvals.

The authority held that, from March 2015, Xilin Gol Radio and Television had forced customers to purchase a certain TV viewing package in addition to the standard viewing package and had done so without informing or warning its customers. When customers raised objections, the company used excuses to stall, refuse or delay the handling of the issue. In the authority’s eyes, this conduct was contrary to the relevant local regulations and customers’ wishes and deprived customers of their “right of choice,” harming consumers and market competition. The authority held that this conduct was not justified.

The Inner Mongolia AIC concluded that Xilin Gol Radio and Television had imposed unreasonable conditions in violation of the AML. In determining the sanctions, the Inner Mongolia AIC took into account that the company had actively cooperated in the investigation, admitted its infringement and terminated the conduct in October 2015 before the investigation was over.

Antitrust in the TV area

This is one of the few antitrust cases in the TV sector in China. Recent cases this sector include, for example, the Shaanxi digital TV case in 2013 and three appeal judgments brought against one tying decision and two excessive fees decisions of a local AIC in Fujian Province in 2015.

In the Shaanxi digital TV case, defendant Shaanxi Broadcast & TV Intermediary Group (the only authorized cable TV provider in Shaanxi Province) prevailed against the allegation by the plaintiff (an individual TV user) that it had abused its dominant position by bundling basic TV services and premium TV services. Chinese antitrust enforcer sanctions TV provider services.

In another case of tying in the TV sector, Fujian Broadcast managed to overturn in court the Quanzhou AIC’s decision that it had bundled TV services and set-top boxes. The Quanzhou court found that the local AIC had failed to ascertain if the bundling had been made on the basis of objective technical reasons or if the company imposed artificial, anti-competitive restrictions on customers. The case also involved two other decisions by the Quanzhou AIC alleging excessive fees imposed by Fujian Broadcast on customers, which were however upheld by the Quanzhou court.

Together, these cases and the latest decision by the Inner Mongolia AIC against Xilin Gol Radio and Television show that TV and – more broadly – the traditional media sector have come under closer scrutiny by antitrust enforcers. For example, SAIC has launched a nationwide enforcement campaign targeting anti-competitive behaviour by public utilities, which presumably include TV service providers.